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- During the second half of January, diesel and heating fuel prices surged. The largest increases occurred in the distillate-based fuels (heating oil and diesel) in the Northeast.
- The main factors driving up these prices were low stocks leading into January, followed by a bout of severe weather that impacted both supply and demand.
- Warmer weather and the arrival of new supply, mainly imports, relieved the supply/demand imbalance and brought prices back down. The spike is now behind us, but high crude prices are keeping prices above year-ago levels.
- The low stock situation that set the stage for the distillate price spike was not unique to the United States, Low stocks exist worldwide and are not limited to distillate. The low stock situation stems from what is happening in the crude oil markets. A crude oil supply shortage drove crude prices up and caused refiners worldwide to draw down stocks as the higher crude prices squeezed margins.
- Global crude oil fundamentals appear to be easing with OPECís recent agreement to increase supply, which has already resulted in some downward price pressure. This gradual return to lower prices and higher inventories is expected to continue, but not without continuing risk of volatility.